United States District Court, E.D. Virginia, Norfolk Division
OPINION AND ORDER
J. Krask United States Magistrate Judge
case is before the Court on defendant Dell Inc.'s
("Dell"), motion to preclude plaintiffs Audio MPEG,
Inc. ("Audio MPEG"), U.S. Philips Corporation,
Orange SA, TDF SAS, Institut Fur Rundfunktechnik GmBh, and
counterclaim defendant Societa Italiana per lo Sviluppo
deli'Elettronica S.p.A. ("Sisvel")
(collectively, "plaintiffs") from offering
argument, evidence, or testimony referencing the large number
of licenses, over 1, 000, that plaintiffs entered into with
third parties prior to this litigation. ECF No. 438 (Mot. #1
of Dell's Omnibus Mot. In Limine); see also ECF
Nos. 442, 464, 512. Following oral argument held July 24,
2017, the Court directed the parties to file supplemental
memoranda. Order at 1, 3, ECF No. 657. The parties filed the
supplemental memoranda in August 2017, ECF Nos. 711, 779,
820, and the Court heard further oral argument on September
8, 2017. Garrard R. Beeney, Esq., Matthew J. Porpora, Esq.,
Marc De Leeuw, Esq., and Stephen E. Noona, Esq., represented
plaintiffs. John Thorne, Esq., Derek T. Ho, Esq., Benjamin J.
Gottesman, Esq., and Charles B. Molster,
III, Esq., represented Dell. The court
reporter was Paul McManus. For the following reasons,
Dell's motion in limine is GRANTED IN
PART AND DENIED IN PART.
FACTUAL AND PROCEDURAL BACKGROUND
their complaint, plaintiffs assert that "[t]o date, more
than 1, 000 manufacturers and sellers of MPEG Audio-enabled
products have taken the license offered by
[plaintiffs]." Compl. ¶ 43, ECF No. 1 (Case No.
2:16cv82). The International Organization for Standardization
("ISO"), through a working group, chose the patent
owners' technology as the basis for the audio compression
standard, which the complaint alleges was finalized in 1991
into two standards known as the MPEG Standards. Compl.
¶¶ 20-23. In a letter to the ISO in 1992, the
patent owners agreed to “Xxxxx.
ECF No. 465-1. In his supplemental expert report,
plaintiffs' damages expert, John C. Jarosz, outlines
plaintiffs' licensing program for the technology related
to the MPEG Standards, which was initially carried out by the
patent owners and later by Audio MPEG and Sisvel. Suppl.
Expert Report of John C. Jarosz, Dec. 28, 2016 ("Mr.
Jarosz Suppl. Rpt.") at 34-44, ECF No. 556-2.
Jarosz analyzed the evolution of plaintiffs' licensing
program and a representative sample of licenses negotiated
over the life of the program, including licenses negotiated
by the patent owners, as well as by Audio MPEG and Sisvel.
Id. at 33-44, Tabs 13, 15. Mr. Jarosz noted that
Xxxxxx., " explaining:
Id. at 34, see also Id. at 38-39. In
consideration for the license, third-parties agreed to pay
royalties, and most of the agreements contained the
"Xxxxx'' consisting of
Id. at 35. 
Id. at 38-40.
Id. at 40-41. ''Xxxxx'' Id. at 42. Xxxxx Id. at 43.
Jarosz calculated damages based, in part, on his review of
the licensing program, the representative licenses, and the
total number of licenses negotiated. Id. at 2-4.
Dell's motion in limine seeks to preclude
argument, evidence, or testimony referencing the large number
of third-party licenses.
Rule 26(a)(3) disclosures contained over 3, 500 exhibits that
relate to the 1, 000 plus licenses. Dell's Omnibus Mot.
In Limine and Mem. in Support ("Def.'s
Mot.") at 2, ECF No. 442; Pls.' Mem. in Opp. to
Dell's Omnibus Mot. In Limine ("Pls.'
Mem. in Opp.") at 8 n.3, ECF No. 464. Plaintiffs,
however, disclaim any intent to offer all 3, 500 license
exhibits, and they initially proposed to offer some lesser
number of licenses and a compilation exhibit, a one-half inch
thick document, instead of the 3, 500 exhibits. July 24,
2017, Hearing Transcript ("Jul. 24, 2017 Hrg. Tr.")
at 91, ECF No. 656.
July 24, 2017 hearing, the Court asked counsel to file
supplemental briefs addressing: (1) "whether it's
possible to use a significantly smaller subset of licenses
regarding the issues of what's a reasonable royalty... or
on the validity issue;" and (2) "what plaintiffs
need or desire in terms of evidence of commercial success as
that relates to validity and whether some kind of limited
evidence or a stipulation would suffice to address this
issue." Jul. 24, 2017 Hrg. Tr. at 98-100.
response, plaintiffs proposed not to seek to "introduce
any compilation of licenses" if: (a) plaintiffs'
witnesses were allowed to testify "(i) to the number of
licenses plaintiffs have entered on the patents-in-suit (and
the date range of those licenses), (ii) to the revenues
generated from those licenses, and (iii) that every other
major computer manufacturer has taken a license, " (b)
some sample of licenses were admitted, and (c)
plaintiffs' witnesses "could testify about a
comparably small number of specific licenses (e.g.,
Mr. Jarosz could testify about specific licenses he
analyzed)." Aug. 1, 2017 Email from Pls.' Counsel to
Def.'s Counsel, ECF No. 710-1 at 3.
countered with an offer to introduce nine licenses entered
into by Acer, Apple, Lenovo, Microsoft, and Toshiba, and
"agree to stipulate to the commercial success of the
asserted patents and  that the aggregate amount of
licensing revenues attributable to the asserted patents may
be introduced at trial, so long as [plaintiffs] will not
introduce evidence regarding the 1000 licenses." Aug. 3,
2017 Email from Def.'s Counsel to Pls.' Counsel, ECF
No. 710-1 at 2.
asked, during the hearing on September 8, 2017, what number
of actual license exhibits Dell would need to defend the
case, Dell responded that "20-ish" would be a
reasonable number. September 8, 2017, Hearing Transcript
("Sept. 8, 2017 Hrg. Tr.") at 81, ECF No. 854.
Plaintiffs responded that "agreements with 43
licensees" would be the maximum number of actual
licenses plaintiffs would need to offer. Sept. 8, 2017 Hrg.
Tr. at 89-90.
asserts that the number of licenses plaintiffs
negotiated with third parties is irrelevant, or of marginal
relevance, to the material issues in the case, including
validity and damages. Def.'s Mot. at 2-4. Next, Dell
asserts that the number of third-party licenses is not
relevant because plaintiffs have not established that those
licenses are comparable to a hypothetical license with Dell.
Dell's Opp. to Pls.' Suppl. Mem. ("Def.'s.
Suppl. Mem. in Opp.") at 3, ECF No. 779. Even if the
number is relevant, Dell argues the evidence of over 1, 000
licenses would unfairly prejudice Dell, reverse the burden of
proof, and require substantial time to address the
circumstances surrounding these licenses. Def.'s Mot. at
1. According to plaintiffs, these 1, 000 plus third-party
licenses contain substantially identical terms and royalty
schedules, and evidence of the licenses is relevant to the
issues of damages, validity, willfulness, and for accurately
describing the nature of plaintiffs Audio MPEG and
Sisvel's business. Plaintiffs' Suppl. Mem. of Law in
Opp. to Dell's Mot. In Limine ("Pls.'
Suppl. Mem. in Opp.") at 5, 8-14, ECF No. 711.